Friday

May 8, 2020 at 11:20 AM

Retailers that were already struggling before the coronavirus pandemic started are beginning to crumble.

Fashion chain J. Crew Group and luxury department store retailer Neiman Marcus Group filed for Chapter 11 bankruptcy protection in the first week of May as they faced mounting losses with their stores temporarily closed.

While both companies are planning to remain in business, bankruptcy poses the possibility of permanent store closings or outright liquidation as COVID-19 throttles sales.

J.C. Penney, which was facing declining sales and several years of losses heading into this crisis, is also considering filing for bankruptcy and hoping to avoid liquidation.

Of the 125 restaurant or retail companies tracked by S&P Global Ratings, about 30% now have a credit rating that indicates they have at least a 1-in-2 chance of defaulting on their debts, which is often a precursor of bankruptcy or liquidation.

"We believe the economic shutdown and lingering social distancing behaviors will trigger a broad shakeout of retail as the industry will be forced to meaningfully reduce its physical footprint and rapidly evolve to reach the post-pandemic consumer," S&P credit analyst Sarah Wyeth wrote Monday in a research note. "In particular, if there were any doubts about the eventual demise of many American malls, the impact of the pandemic will likely dispel them."

For every day that retailers are closed during the coronavirus crisis, the chances that they won't survive this pandemic grow larger.

While some retailers are flourishing – namely chains with grocery sales like Walmart, Target, Kroger and Costco – others are trying to stave off doom, like Forever 21, Jo-Ann Stores and David's Bridal. In many cases, these retailers were already in trouble as Americans shopped increasingly online.

U.S. retailers have so far announced 2,210 permanent closures this year, most of which were made public before the pandemic began, according to retail analytics firm Coresight Research.

The digital transition's effect on retail was already painfully evident before the pandemic began. Papyrus, Modell’s Sporting Goods and Art Van Furniture had already revealed plans to liquidate all 635 of their locations this year. That follows a year in which more than 9,700 stores closed, according to Coresight Research.

“It’s a battle of who’s going to survive, who’s just going to close and who’s going to need to file for bankruptcy,” Camilla Yanushevsky, a retail stock analyst for CFRA Research, said in a recent interview. “The companies that are most at risk at the ones that were already distressed before the crisis.”

But it's not bad for all retailers. Home improvement stores like Home Depot and Lowe's and drugstore chains like Walgreens and CVS have experienced an increase in business.

Here’s a list of retailers that are trying to avoid bankruptcy or store closings, according to USA TODAY research, public data and analyst reports:

J.C. Penney

J.C. Penney is considering filing for bankruptcy protection as the retailer grapples with the fallout from the coronavirus pandemic and its own long-in-the-making struggles.

The Plano, Texas-based company is exploring the possibility, along with a range of other options, including out-of-court debt restructuring, according to a person familiar with the deliberations who was not authorized to speak publicly.

With all of its stores temporarily closed because of the coronavirus, J.C. Penney is bleeding cash while it awaits the chance to get back on its feet. The company has been challenged for years with the decline of the department store sector.

J. Crew Group

J. Crew filed for Chapter 11 bankruptcy protection on Monday, May 4, after years of struggling with too much debt.

The company, which leases all of its stores, disclosed in a court filing that it had hired a real estate consultancy and liquidator to help it evaluate its leases and negotiate rent relief. Permanent store closings are possible.

Neiman Marcus

The luxury department store chain filed for Chapter 11 bankruptcy protection on Thursday, May 7, after dealing with too much debt.

The company said in a statement that it's not planning "mass store closings" on a permanent basis after reaching a restructuring deal with a majority of its creditors. But the company said it may consider future closings on a "case by case basis."

Forever 21

Forever 21 filed for Chapter 11 bankruptcy in September with plans to close roughly 100 struggling stores and save the rest of the business. The company then finished a deal on Feb. 19 to sell most of its remaining assets to a group of investors led by Authentic Brands and mall owner Simon Property Group, which had previously used a similar model to rescue fashion retailer Aéropostale.

Talk about tough timing.

Exactly a month later, while still deciding which stores to liquidate, the buyer temporarily closed all Forever 21 locations due to the pandemic.

The pandemic disruption threatens to derail Forever 21’s comeback before it even gets underway.

Sears and Kmart

These sibling chains have been out of bankruptcy for about 15 months, but it was hard to envision a return to greatness before the pandemic, let alone after it.

Sears and Kmart have closed more than 3,500 stores and cut about 250,000 jobs over the last 15 years. After tumbling into Chapter 11 bankruptcy in October 2018, the chains narrowly escaped total liquidation after a last-minute sale in February 2019 to their parent company's longtime investor and former CEO Eddie Lampert.

But time is running out for Sears and Kmart to stabilize their businesses. In February 2020, another 51 Sears and 45 Kmart locations were set to close, leaving some 182 surviving stores.

Jo-Ann Stores

The fabrics chain was already under pressure due to the effect of President Donald Trump's trade war with China, which led to tariffs on many of the goods the company sells. Now, temporary store closings have worsened things.

"We believe Jo-Ann will run into liquidity problems within the next 12 months," S&P's Wyeth wrote.

Steak n Shake

The restaurant chain has been ailing for years. With a term loan due March 19, 2021, the timing of the coronavirus couldn't have been worse.

S&P rates the company as a significant risk to default further on its debts.

California Pizza Kitchen

Trouble was mounting for this restaurant chain well before the pandemic began.

S&P had predicted that the company would "breach its financial maintenance

covenants" without a last-minute financial maneuver, such as relief from lenders.

But "given the catastrophic impact to casual dining and the company's weak performance going into it, we believe California Pizza Kitchen" will "likely restructure its capital structure in the next six months," Wyeth reported.

Now, weddings and receptions have been disrupted throughout the country, with many governments limiting the number of people who can attend.

While normal weddings may resume after the crisis subsides, the economic effects of the pandemic could lead couples to delay plans or spend less on their big day.

David’s Bridal has already announced plans for “a substantial reduction in expenses, capital expenditures and inventory commitments,” as well as pay cuts and furloughs for most store employees and more than half of its corporate workers.

Ascena Retail Group

The company's stores include Lane Bryant, Justice, Loft and Ann Taylor. And like other apparel retailers with a heavy commitment to shopping malls, Ascena was grappling with declining foot traffic long before the pandemic.

Now, hopes of a sudden influx of business in the wake of the pandemic seem especially dim.

In 2019, 62% of store closure announcements came in the apparel sector, according to global marketing research firm Coresight Research.

GNC Holdings

Listed by Moody's as among the most distressed retailers, GNC had already announced at least 304 store closures this year by the time the pandemic began, according to Coresight Research.

On March 20, S&P Global Ratings downgraded the credit rating for the chain of nutrition-product stores to CC. It cited the company’s “likely inability to repay debt.”

“We believe conditions for GNC are deteriorating substantially due to the coronavirus pandemic, the anticipated macroeconomic downturn and the limited access to capital markets,” S&P reported.

Pier 1 Imports

Pier 1 Imports announced in January that it would close up to 450 stores, or nearly half of its locations. Then the company filed for Chapter 11 bankruptcy protection in February.

The company reportedly received approval from a federal judge to put off rent payments. But while the company is still mired in bankruptcy, it's unclear whether it can chart a path out amid this crisis.

Contributing: Kelly Tyko

Follow USA TODAY reporters Nathan Bomey on Twitter @NathanBomey.

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